Intrinsic value of Geospace Technologies - GEOS

Previous Close

$15.16

  Intrinsic Value

$3.59

stock screener

  Rating & Target

str. sell

-76%

Previous close

$15.16

 
Intrinsic value

$3.59

 
Up/down potential

-76%

 
Rating

str. sell

We calculate the intrinsic value of GEOS stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  49.80
  45.32
  41.29
  37.66
  34.39
  31.45
  28.81
  26.43
  24.28
  22.36
  20.62
  19.06
  17.65
  16.39
  15.25
  14.22
  13.30
  12.47
  11.72
  11.05
  10.45
  9.90
  9.41
  8.97
  8.57
  8.22
  7.89
  7.61
  7.34
  7.11
Revenue, $m
  110
  160
  227
  312
  419
  551
  710
  898
  1,116
  1,366
  1,647
  1,961
  2,307
  2,685
  3,095
  3,535
  4,005
  4,505
  5,033
  5,589
  6,173
  6,784
  7,423
  8,089
  8,782
  9,504
  10,254
  11,034
  11,845
  12,687
Variable operating expenses, $m
  97
  141
  199
  274
  368
  484
  624
  788
  980
  1,199
  1,446
  1,722
  2,026
  2,358
  2,717
  3,104
  3,517
  3,955
  4,419
  4,907
  5,420
  5,957
  6,517
  7,102
  7,711
  8,345
  9,003
  9,688
  10,400
  11,139
Fixed operating expenses, $m
  66
  68
  69
  71
  72
  74
  76
  77
  79
  81
  83
  84
  86
  88
  90
  92
  94
  96
  98
  100
  103
  105
  107
  110
  112
  114
  117
  120
  122
  125
Total operating expenses, $m
  163
  209
  268
  345
  440
  558
  700
  865
  1,059
  1,280
  1,529
  1,806
  2,112
  2,446
  2,807
  3,196
  3,611
  4,051
  4,517
  5,007
  5,523
  6,062
  6,624
  7,212
  7,823
  8,459
  9,120
  9,808
  10,522
  11,264
Operating income, $m
  -53
  -48
  -42
  -33
  -21
  -7
  11
  32
  57
  86
  118
  155
  195
  239
  287
  339
  395
  453
  516
  581
  650
  723
  798
  877
  959
  1,045
  1,134
  1,227
  1,323
  1,423
EBITDA, $m
  -34
  -20
  -2
  22
  52
  90
  135
  189
  252
  325
  407
  498
  599
  709
  829
  958
  1,096
  1,242
  1,397
  1,560
  1,731
  1,910
  2,097
  2,293
  2,496
  2,708
  2,929
  3,158
  3,396
  3,643
Interest expense (income), $m
  0
  0
  0
  1
  1
  2
  3
  4
  5
  6
  8
  10
  12
  15
  17
  20
  23
  27
  30
  34
  38
  42
  47
  52
  57
  62
  67
  73
  78
  84
  91
Earnings before tax, $m
  -53
  -49
  -42
  -34
  -23
  -9
  7
  27
  51
  78
  108
  143
  181
  222
  267
  316
  368
  423
  482
  543
  608
  676
  747
  821
  898
  978
  1,061
  1,148
  1,238
  1,332
Tax expense, $m
  0
  0
  0
  0
  0
  0
  2
  7
  14
  21
  29
  39
  49
  60
  72
  85
  99
  114
  130
  147
  164
  182
  202
  222
  242
  264
  287
  310
  334
  360
Net income, $m
  -53
  -49
  -42
  -34
  -23
  -9
  5
  20
  37
  57
  79
  104
  132
  162
  195
  231
  269
  309
  352
  397
  444
  493
  545
  599
  655
  714
  775
  838
  904
  973

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  246
  357
  505
  695
  934
  1,228
  1,582
  2,000
  2,486
  3,041
  3,669
  4,368
  5,139
  5,981
  6,893
  7,873
  8,921
  10,033
  11,210
  12,448
  13,749
  15,110
  16,532
  18,015
  19,560
  21,167
  22,838
  24,575
  26,380
  28,256
Adjusted assets (=assets-cash), $m
  246
  357
  505
  695
  934
  1,228
  1,582
  2,000
  2,486
  3,041
  3,669
  4,368
  5,139
  5,981
  6,893
  7,873
  8,921
  10,033
  11,210
  12,448
  13,749
  15,110
  16,532
  18,015
  19,560
  21,167
  22,838
  24,575
  26,380
  28,256
Revenue / Adjusted assets
  0.447
  0.448
  0.450
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
Average production assets, $m
  97
  140
  198
  273
  367
  483
  622
  786
  977
  1,195
  1,441
  1,716
  2,019
  2,350
  2,708
  3,093
  3,505
  3,942
  4,404
  4,891
  5,402
  5,936
  6,495
  7,078
  7,685
  8,316
  8,973
  9,655
  10,364
  11,101
Working capital, $m
  37
  53
  76
  104
  140
  184
  237
  299
  372
  455
  549
  653
  768
  894
  1,031
  1,177
  1,334
  1,500
  1,676
  1,861
  2,056
  2,259
  2,472
  2,694
  2,925
  3,165
  3,415
  3,674
  3,944
  4,225
Total debt, $m
  5
  12
  22
  34
  49
  68
  91
  117
  149
  184
  224
  269
  318
  372
  431
  493
  560
  632
  707
  786
  869
  957
  1,048
  1,142
  1,241
  1,344
  1,451
  1,562
  1,678
  1,798
Total liabilities, $m
  16
  23
  32
  44
  60
  79
  101
  128
  159
  195
  235
  280
  329
  383
  441
  504
  571
  642
  717
  797
  880
  967
  1,058
  1,153
  1,252
  1,355
  1,462
  1,573
  1,688
  1,808
Total equity, $m
  230
  335
  473
  651
  874
  1,150
  1,481
  1,872
  2,327
  2,847
  3,434
  4,088
  4,810
  5,598
  6,452
  7,369
  8,350
  9,391
  10,492
  11,652
  12,869
  14,143
  15,474
  16,862
  18,308
  19,812
  21,376
  23,002
  24,692
  26,447
Total liabilities and equity, $m
  246
  358
  505
  695
  934
  1,229
  1,582
  2,000
  2,486
  3,042
  3,669
  4,368
  5,139
  5,981
  6,893
  7,873
  8,921
  10,033
  11,209
  12,449
  13,749
  15,110
  16,532
  18,015
  19,560
  21,167
  22,838
  24,575
  26,380
  28,255
Debt-to-equity ratio
  0.020
  0.040
  0.050
  0.050
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
Adjusted equity ratio
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -53
  -49
  -42
  -34
  -23
  -9
  5
  20
  37
  57
  79
  104
  132
  162
  195
  231
  269
  309
  352
  397
  444
  493
  545
  599
  655
  714
  775
  838
  904
  973
Depreciation, amort., depletion, $m
  19
  28
  40
  55
  73
  97
  124
  157
  195
  239
  288
  343
  404
  470
  542
  619
  701
  788
  881
  978
  1,080
  1,187
  1,299
  1,416
  1,537
  1,663
  1,795
  1,931
  2,073
  2,220
Funds from operations, $m
  -34
  -21
  -3
  21
  50
  87
  130
  177
  232
  296
  367
  447
  536
  632
  737
  849
  970
  1,097
  1,232
  1,375
  1,524
  1,681
  1,844
  2,015
  2,192
  2,377
  2,569
  2,769
  2,977
  3,193
Change in working capital, $m
  12
  17
  22
  28
  36
  44
  53
  63
  73
  83
  94
  105
  115
  126
  136
  147
  157
  166
  176
  185
  194
  204
  213
  222
  231
  240
  250
  260
  270
  280
Cash from operations, $m
  -46
  -37
  -25
  -8
  15
  43
  77
  115
  160
  213
  274
  343
  420
  506
  600
  703
  813
  931
  1,057
  1,189
  1,330
  1,477
  1,632
  1,793
  1,961
  2,137
  2,320
  2,510
  2,707
  2,912
Maintenance CAPEX, $m
  -13
  -19
  -28
  -40
  -55
  -73
  -97
  -124
  -157
  -195
  -239
  -288
  -343
  -404
  -470
  -542
  -619
  -701
  -788
  -881
  -978
  -1,080
  -1,187
  -1,299
  -1,416
  -1,537
  -1,663
  -1,795
  -1,931
  -2,073
New CAPEX, $m
  -32
  -44
  -58
  -75
  -94
  -115
  -139
  -164
  -191
  -218
  -246
  -275
  -303
  -331
  -358
  -385
  -411
  -437
  -462
  -487
  -511
  -535
  -559
  -583
  -607
  -631
  -657
  -682
  -709
  -737
Cash from investing activities, $m
  -45
  -63
  -86
  -115
  -149
  -188
  -236
  -288
  -348
  -413
  -485
  -563
  -646
  -735
  -828
  -927
  -1,030
  -1,138
  -1,250
  -1,368
  -1,489
  -1,615
  -1,746
  -1,882
  -2,023
  -2,168
  -2,320
  -2,477
  -2,640
  -2,810
Free cash flow, $m
  -91
  -100
  -111
  -122
  -134
  -146
  -159
  -174
  -188
  -201
  -212
  -220
  -226
  -228
  -228
  -224
  -217
  -207
  -194
  -178
  -159
  -138
  -114
  -89
  -61
  -31
  0
  33
  67
  103
Issuance/(repayment) of debt, $m
  5
  7
  9
  12
  15
  19
  23
  27
  31
  36
  40
  45
  49
  54
  58
  63
  67
  71
  75
  79
  83
  87
  91
  95
  99
  103
  107
  111
  116
  120
Issuance/(repurchase) of shares, $m
  129
  153
  181
  212
  247
  285
  326
  371
  418
  463
  508
  550
  590
  626
  658
  687
  712
  732
  749
  763
  773
  781
  786
  789
  790
  790
  789
  787
  785
  783
Cash from financing (excl. dividends), $m  
  134
  160
  190
  224
  262
  304
  349
  398
  449
  499
  548
  595
  639
  680
  716
  750
  779
  803
  824
  842
  856
  868
  877
  884
  889
  893
  896
  898
  901
  903
Total cash flow (excl. dividends), $m
  43
  60
  79
  102
  128
  158
  190
  224
  260
  298
  336
  375
  413
  452
  489
  526
  562
  597
  631
  664
  697
  730
  763
  795
  828
  862
  896
  931
  968
  1,006
Retained Cash Flow (-), $m
  -129
  -153
  -181
  -212
  -247
  -285
  -331
  -391
  -455
  -520
  -587
  -654
  -722
  -788
  -854
  -918
  -980
  -1,041
  -1,101
  -1,160
  -1,217
  -1,274
  -1,331
  -1,388
  -1,446
  -1,504
  -1,564
  -1,626
  -1,689
  -1,756
Prev. year cash balance distribution, $m
  41
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  -45
  -93
  -101
  -110
  -119
  -127
  -141
  -167
  -194
  -222
  -251
  -280
  -308
  -337
  -365
  -392
  -419
  -445
  -470
  -495
  -520
  -544
  -569
  -593
  -618
  -643
  -668
  -694
  -722
  -750
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  -43
  -85
  -88
  -91
  -92
  -92
  -96
  -104
  -112
  -116
  -119
  -119
  -117
  -113
  -107
  -100
  -91
  -82
  -72
  -63
  -54
  -45
  -37
  -30
  -24
  -19
  -14
  -11
  -8
  -6
Current shareholders' claim on cash, %
  55.9
  34.3
  22.7
  15.9
  11.7
  9.0
  7.1
  5.7
  4.7
  4.0
  3.4
  2.9
  2.6
  2.3
  2.1
  1.9
  1.7
  1.6
  1.5
  1.4
  1.3
  1.2
  1.2
  1.1
  1.1
  1.0
  1.0
  1.0
  0.9
  0.9

Geospace Technologies Corporation designs and manufactures instruments and equipment used by the oil and gas industry to acquire seismic data in order to locate, characterize and monitor hydrocarbon producing reservoirs. The Company also designs and manufactures non-seismic products, including industrial products, offshore cables and imaging equipment. The Company operates through two segments: Seismic and Non-Seismic. The Company's Seismic product segments include traditional exploration products, wireless exploration products and reservoir products. Its seismic product lines consist of land and marine nodal data acquisition systems, permanent land and seabed reservoir monitoring products and services, geophones and geophone strings, hydrophones, leader wire, connectors, telemetry cables, marine streamer retrieval and steering devices and various other products. The Company's Non-Seismic product segments include imaging and industrial products.

FINANCIAL RATIOS  of  Geospace Technologies (GEOS)

Valuation Ratios
P/E Ratio -3.6
Price to Sales 2.8
Price to Book 1
Price to Tangible Book
Price to Cash Flow 20.4
Price to Free Cash Flow 25.5
Growth Rates
Sales Growth Rate 19.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -43.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -24.7%
Ret/ On Assets - 3 Yr. Avg. -17.1%
Return On Total Capital -26%
Ret/ On T. Cap. - 3 Yr. Avg. -18%
Return On Equity -26%
Return On Equity - 3 Yr. Avg. -18%
Asset Turnover 0.3
Profitability Ratios
Gross Margin -28.4%
Gross Margin - 3 Yr. Avg. -24%
EBITDA Margin -48.6%
EBITDA Margin - 3 Yr. Avg. -46.8%
Operating Margin -73%
Oper. Margin - 3 Yr. Avg. -74.8%
Pre-Tax Margin -73%
Pre-Tax Margin - 3 Yr. Avg. -73.5%
Net Profit Margin -77%
Net Profit Margin - 3 Yr. Avg. -63.3%
Effective Tax Rate -5.6%
Eff/ Tax Rate - 3 Yr. Avg. 14.9%
Payout Ratio 0%

GEOS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GEOS stock intrinsic value calculation we used $73.721 million for the last fiscal year's total revenue generated by Geospace Technologies. The default revenue input number comes from 0001 income statement of Geospace Technologies. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our GEOS stock valuation model: a) initial revenue growth rate of 49.8% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for GEOS is calculated based on our internal credit rating of Geospace Technologies, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Geospace Technologies.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of GEOS stock the variable cost ratio is equal to 87.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $65 million in the base year in the intrinsic value calculation for GEOS stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Geospace Technologies.

Corporate tax rate of 27% is the nominal tax rate for Geospace Technologies. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the GEOS stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for GEOS are equal to 87.5%.

Life of production assets of 3.6 years is the average useful life of capital assets used in Geospace Technologies operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for GEOS is equal to 33.3%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $195.154 million for Geospace Technologies - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 13.597 million for Geospace Technologies is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Geospace Technologies at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ Geospace Technologies: Fiscal 4Q Earnings Snapshot   [Nov-15-18 04:55PM  Associated Press]
▶ Geospace Technologies Secures Two Large OBX Contracts   [Aug-30-18 10:10AM  Business Wire]
▶ Houston seismic data equipment manufacturer buys security co.   [Jul-31-18 03:24PM  American City Business Journals]
▶ Geospace Technologies: Fiscal 2Q Earnings Snapshot   [May-04-18 05:05AM  Associated Press]
▶ Geospace Technologies reports 1Q loss   [Feb-06-18 06:27PM  Associated Press]
▶ Houston oil and gas equipment manufacturer cutting costs, local jobs again   [Dec-27-17 09:30AM  American City Business Journals]
▶ Geospace Technologies Announces Cost Reductions   [Dec-14-17 04:30PM  Business Wire]
▶ Geospace Technologies' Revenue, EPS Losses Climb   [Dec-01-17 02:02PM  Motley Fool]
▶ Geospace Technologies reports 4Q loss   [Nov-30-17 04:39PM  Associated Press]
▶ Geospace Technologies reports 3Q loss   [03:17AM  Associated Press]
▶ Geospace Technologies reports 2Q loss   [05:03AM  Associated Press]
▶ Geospace Technologies reports 1Q loss   [Feb-08-17 04:52PM  Associated Press]

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